Aluminium market remains “More pain, before the cure”: Deutsche Bank

UNITED STATES October 23 2013 12:10 PMTweet
 
LONDON(Scrap Register): Deutsche Bank said that the aluminium market remains “more pain, before the cure”. That means weaker pricing in the near-term, to force further producer discipline, but we think the outlook has started to improve modestly. UC RUSAL’s update on their capacity closure plans went further than we had factored into our supply – demand assessment.

“Adjusting for this announcement, we see a market in a modest surplus position over the next three years; 460kt in 2013E, and 230kt in 2014 and 2015E. Although Alcoa have not given a detailed impact assessment from the pot instability at Ma’aden, we have trimmed our forecasts very modestly for 2013 and 2014. We had already reduced our surplus forecasts in anticipation of further “unallocated” cuts some of which now been accounted for by RUSAL - we still have 400kt penciled in for 2015E,” the bank added.

“We see the aluminium market outside of China as being in a modest but increasing deficit, but the Chinese market still in a more substantial surplus, with this surplus being exported in the form of semi’s,” Bank continued.

RUSAL has mothballed the Volgograd (VgAZ), Urals (UAZ), and Volkhov (VAZ) aluminium smelters, as well as at the first phase of Novokuznetsk (NkAZ) smelter and the ALSCON smelter in Nigeria. In addition, aluminium production has been mothballed at the Bogoslovsk (BAZ) smelter potrooms 2, 3, 4, 5 (potroom 1 was shut down in 2011) and at the Nadvoitsy (NAZ) smelter potrooms 1, 2 (potroom 3 was shut down in 2012).

Furthermore, measures such as amperage reduction at the Sayanogorsk (SAZ), Irkutsk (IrkAZ), Novokuznetsk (second phase) and Khakass (KhaZ) aluminium smelters has lead to further reductions. Output reduction in 2013 at these smelters will amount to 77,724 tonnes with an expected effect of 131,442 tonnes in 2014.

As a result of the output reduction programme, RUSAL has cut aluminium production by 325kt, or 8% of 2012 production volume, and 648kt, or 15% of 2012 production volume, in 2014. The company has also delayed the start of commissioning on the Boguchansky smelter until mid- 2014.

Although no formal announcement has been made we have also pushed out the commissioning of the new Taishet smelter until 2016, due to the lack of reliable power to the smelter.